A new opinion from the Fifth Circuit found that an incomplete credit report can still be “accurate” under § 1681e(b) – even where the credit report omits a favorable item from a consumer’s credit report that could be germane to the consumer’s credit history. Although plaintiff had argued that, in deleting a favorable credit item, Credit Reporting Agencies (“CRAs”) had failed to ensure “maximum possible accuracy” of his credit report under § 1681e(b), the court instead ruled that an incomplete report is not always “inaccurate” to the point of being misleading. The Fifth Circuit affirmed the district court’s dismissal of plaintiff’s complaint, and further found that the CRAs did not have a duty to reinvestigate where plaintiff disputed the completeness, rather than an item, of his credit report.
In Hammer v. Equifax Info. Servs., No. 19-10199, 2020 U.S. App. LEXIS 28800, at *5 (5th Cir. Sept. 9, 2020), plaintiff had continually made timely payments to a credit card, and wanted the favorable account included on his credit report. The account associated with the credit card was reported by the three major CRAs until 2017. When plaintiff learned that the CRAs had stopped reporting the account, he requested that it be restored to his credit reports; Equifax and Experian, the defendant CRAs, refused. After several disputes from plaintiff, they added the credit account to his report, but one, Equifax, ultimately removed it again. Plaintiff’s credit score fell after the removal, and he sued Equifax and Experian for negligent and willful violations of the FCRA. The district court granted defendants’ motions to dismiss the complaint, and plaintiff appealed.
The Fifth Circuit determined that the CRAs had not violated § 1681e(b), finding that a credit report is not “inaccurate,” in violation of the statute, every time a report is incomplete – it is only inaccurate when an omission renders the report misleading in a way that would adversely affect credit decisions. Plaintiff’s credit score falling did not suffice for that adverse impact. The court looked to a prior case, Sepulvado v. CSC Credit Servs., Inc., 158 F.3d 890, 895 (5th Cir. 1998), in which a credit report included an entry that had been assigned, but did not report that the obligation had arisen six years earlier. Although the consumer in Sepulvado had argued that the omission made the report inaccurate or misleading, the Fifth Circuit had held that the credit report may have been incomplete, but that did not mean it was inaccurate. The same was true in Hammer: the omission of the favorable account did not render the credit report so misleading that it was “inaccurate” under § 1681e(b). The Hammer court noted that businesses have no reason to believe that a credit report reflects all available information about a given consumer – and that such a requirement would actually be impossible for any CRA to satisfy, because creditors only furnish CRAs with consumer information on a voluntary basis.
Plaintiff had also alleged that defendants violated § 1681i(a) for failing to investigate the omission of the favorable credit account from his credit report. The court disagreed, observing that § 1681i(a) concerns the accuracy of “item[s] of information.” The CRAs’ duty to investigate under § 1681i(a) had not been triggered because plaintiff had not disputed the accuracy or completeness of an item of information, but instead of his credit report as a whole, which plaintiff claimed was incomplete.
Plaintiff’s claim that Equifax violated § 1681i(a)(5)(B) fared no better. While plaintiff claimed that the CRA failed to give him the required statutory notice that it reinserted the credit account into his credit report, the court noted that plaintiff’s brief had not argued that the CRA removed the credit account from plaintiff’s credit file – only from his credit account – and so there was no duty to inform under § 1681i(a)(5)(B). And, although plaintiff argued that he should be allowed to amend the pleading even if he failed to state a claim under § 1681i(a)(5)(B), the court disagreed, finding that the district court had already given plaintiff two opportunities to amend, and each time he had claimed that Equifax never deleted the credit account from his credit file.
So what’s the right standard? Although CRAs must follow “reasonable procedures to assure maximum possible accuracy” of a credit report under § 1681e(b), Hammer shows that there is no one-size-fits-all test for either “reasonable procedures” or “maximum possible accuracy.” Even where plaintiff’s credit score had fallen as a result of the omitted information, the court still saw the favorable account as a “single credit item,” and leaving out that single item did not make the report inaccurate or misleading. Hammer also highlights the critical difference between a credit entry and a credit report under § 1681i(a). Plaintiff had not disputed that the favorable credit account was inaccurate as a credit entry, or that it was incomplete. Instead, he disputed the entire report based on the fact that he believed another entry should have been included – and did not trigger a duty to investigate as a result.